ALP: Is my product “Made in the USA”?
The mark “Made in the USA” has an aura of quality which both American consumers and their foreign counterparts find extremely attractive. Although U.S. products face increased competition in the domestic marketplace, consumers often question the workmanship of cheaper imports. Consequently, a manufacturer’s ability to mark its product as “Made in the USA” provides a significant competitive advantage. The United States government strictly regulates this labeling to protect the marketing advantage of U.S. goods and to provide consumers with accurate information regarding the origin of a prospective purchase.
Just like any other advertising claim, a “Made in the USA” or “American Made” label must be truthful and substantiated. However, as more and more American manufacturers utilize foreign components in their products, when can a company assert that its product is indeed American-made? In order to make the “Made in the USA” claim, the marketers must possess and rely on reasonable information that the product is, in fact, all (or virtually all) made in the United States. The Federal Trade Commission (FTC) has held that a product that is all (or virtually all) made in the U.S. will ordinarily be one in which all significant parts and processing occur in America. At a minimum, to advertise a product as originating in the United Sates, the final assembly or processing must take place in the U.S. Beyond this threshold, the FTC considers additional factors including, but not limited to, the portion of the product’s total manufacturing costs that are attributable to U.S. parts and processing, and how far removed from the finished product is any foreign content.
Even implied representations of a product’s origin, must be accurate. Depending on the context, images such as the “Stars and Stripes,” outlines of U.S. maps or references to U.S. locations may, in conjunction with other facts, imply a claim that a product is of U.S. origin. Due to the desirability of the “Made in the USA” claim, manufacturers of foreign items often illegally seek to represent their goods as American-made. The FTC administers and oversees U.S. law concerning whether or not a product may be represented as “Made in the USA.” Advertising claims containing representations or omissions likely to mislead consumers will be deemed deceptive by the FTC. Such a finding can result in significant penalties and may also provide a company’s competitors with the basis for a costly Lanham Act (i.e., Unfair Competition) lawsuit.
Where a product is not all (or virtually all) made in the United States, any claim of U.S. origin must be expressly and prominently qualified to eliminate consumer confusion. Examples of such qualified claims include “70% U.S. content” or “Made in the USA with German components.” The FTC acknowledges that it may be appropriate in certain circumstances to make “Assembled in the USA” claims without further qualification. However, due to the fact that assembly can range from exceedingly simple to much more complicated and complex processes, the FTC states that “Assembled in the USA” claims should be limited to those instances where the product has undergone its principal assembly in the United States and that such assembly is “substantial.” Additionally, the FTC has held that a product should be last substantially transformed in the United States to properly use an “Assembled in the USA” claim. Products last substantially transformed abroad, may not be labeled as “Made in the USA,” but rather must be labeled to indicate assembly in a foreign country (e.g., “Assembled in Malaysia from U.S. materials.”).
Comparative claims of U.S. origin, such as “More U.S. content than our competitors,” are acceptable so long as they are accurate and substantiated. The FTC has indicated that such comparative claims are permitted where (1) the basis for comparison is clear; (2) the comparative claims do not exaggerate the amount of U.S. content in the product; and (3) there is a meaningful difference in U.S. content between the compared products.
Country of origin marking rules provide an important service to U.S. consumers, who can make informed decisions in the global marketplace. These regulations also protect the marketing advantage enjoyed by companies whose goods are manufactured or assembled in the United States. As a result, the U.S. government reserves the right to impose significant civil penalties on potential violators—up to $10,000 per violation. Any intentional attempt to conceal the country of origin of merchandise, however, will subject violators to a fine of up to $250,000 and/or imprisonment for not more than one (1) year. Failure to disclose the proper country of origin for imported goods also violates the Lanham Act. Civil remedies for Lanham Act violations include the injunction of continuing violations, an accounting of ill-gotten profits, monetary damages, an award of attorney’s fees and costs.
Bottom line: U.S. manufacturers should consult with a legal specialist to ensure compliance with these important regulations and/or to safeguard their products against a competitor’s misuse of a “Made in the USA” claim.